Well, perhaps I have been too harsh. After all, Trump has indeed succeeded in accomplishing something remarkable: imposing the largest tax increase on everyday Americans in decades while convincing them it was actually aimed at foreigners.
Last Thursday, on what the White House dubbed “Liberation Day,” Trump unveiled tariffs that would make even the most ardent 19th-century protectionist blush. With a 10% blanket tax on all imports, supplemented by targeted “reciprocal” tariffs, Trump erected the highest trade barrier since 1909. Vietnam was slapped with 46%, Japan with 24%, South Korea with 25%, and the European Union with 20%. Even Canada and Mexico, America’s neighbours and ostensible trade pact partners, did not escape unscathed.
For those unclear on how tariffs work, here is a simple Trump-to-English translation. When the government imposes a 25% tariff on imported steel, it’s like adding a hefty surcharge that ultimately comes out of the wallets of American businesses and consumers. The added costs ripple through supply chains, affecting everything from the car buyer in Detroit to the appliance purchaser in Dallas and the construction company in Denver. It is the economic equivalent of shooting oneself in the foot and then arguing over who should pay the hospital bill.
The markets, famously resistant to economic common sense according to populists, inconveniently tanked. The S&P 500 dropped 6% in a single day, while the Dow Jones Industrial Average plummeted over 2,200 points. The two-day tariff rout wiped out a record $6.6 trillion in market value. JPMorgan analysts promptly raised their odds of a global recession to 60%.
Trump claims his “beautiful” tariffs will generate $6 trillion in revenue over a decade. Losing $6.6 trillion to gain $6 trillion is apparently what passes for brilliant deal-making these days. The Yale Budget Lab calculated that Trump’s tariffs amount to an immediate tax increase of over $700 billion on American consumers and businesses – a contractionary shock of 2.3% of GDP even before factoring in retaliatory measures.
But perhaps the most bewildering aspect of Trump’s tariff crusade is his unyielding belief that a trade deficit means America is “losing.” To hear him tell it, the United States is being fleeced whenever it imports more than it exports. “A deficit is a loss,” he declared, as if every Toyota sold in America is a point for Japan in some grand economic competition. Never mind that Americans receive actual cars, electronics, and cheaper goods in exchange for those dollars.
This worldview – enthusiastically reinforced by hapless trade adviser Peter Navarro and Treasury Secretary Scott Bessent – treats international commerce like a sporting event with a scoreboard. “We have a $1 trillion trade deficit,” Trump laments. “Hundreds of billions of dollars a year we lose to China.” By this peculiar logic, when you buy a shirt at Target, you’ve “lost” to the retailer because money left your pocket. The fact that you now own a perfectly good shirt is apparently irrelevant.
What makes this trade war even more absurd is that it’s a solution to a problem that doesn’t exist. As the Cato Institute’s N.J. Michel explains in the Wall Street Journal, the Trump-Vance narrative that free trade has hollowed out middle America is pure fiction. The American middle class has thrived over recent decades, not declined. The share of households earning more than $100,000 has tripled over the past five decades, while the share earning less than $35,000 fell by 25%. Workers in the bottom 10% of income distribution have experienced stronger wage growth than those with higher incomes.
Free trade has brought Americans cheaper goods, greater variety, and higher living standards. The average American family saves thousands of dollars annually thanks to trade – from more affordable clothing and electronics to cheaper food and medicines. Those iPhones and affordable flat-screen TVs? Thank global supply chains. The year-round produce in supermarkets? Thank international trade. The lower-priced medications that save lives? Thank pharmaceutical supply chains that span continents.
And the claim that manufacturing jobs vanished due to unfair trade is equally bogus. US manufacturing jobs have been declining as a share of employment since 1943 – long before NAFTA, China’s WTO entry, or any of Trump’s trade bogeymen. This reflects technological progress and rising productivity, not economic failure. By 2018, an American steelworker could produce twenty times more steel per hour than in 1980.
But why let facts get in the way of a good tariff?
Secretary of State Marco Rubio reassured the public that while “markets are crashing,” economies weren’t. This is rather like saying the patient is coding on the operating table but their cholesterol numbers look great.
Clearly, this is strategic genius on a level I failed to appreciate in my previous columns. The four-dimensional chess involves sacrificing the bishop, rook, queen and most of the pawns in order to... well, I am still working out that part.
Beijing seems ready to play by Trump’s rules. Within days, China announced a matching 34% tariff on all American goods, added export controls on rare earth minerals, and blacklisted dozens of American companies. Trump remained unbowed, declaring “China played it wrong, they panicked,” as if commenting on a poker game rather than international economic policy. “Now is a great time to get rich,” he added helpfully, as millions of Americans watched their retirement accounts bleed out.
The European Union began plotting its own response, with France’s President Macron urging European companies not to invest in the United States. Canadian Prime Minister Mark Carney observed, “Our old relationship of steadily deepening integration with the United States is over.”
But perhaps the most brilliant aspect of Trump’s trade war is how effectively it undermines America’s strategic interests. After decades of careful diplomacy to build alliances against Chinese expansion, Trump has managed in a single week to throw Japan, South Korea, and Vietnam “into the delighted arms of China’s Xi Jinping,” as one analyst put it. With America now punishing its allies alongside its competitors, Xi can pose as the defender of global trade while expanding China’s economic orbit.
Taiwanese citizens, watching their American “defender” slap their nation with a 32% tariff while calling them industrial thieves, could be forgiven for reconsidering their options. Should China decide to press its claims, one wonders if Taiwan will still see America as its protector or merely as a fickle bully.
Trump’s supporters insist this is all part of a master plan — these tariffs are merely bargaining chips to secure better deals. Unfortunately, Trump has repeatedly professed his love of tariffs, calling himself “Tariff Man” and insisting they enrich America. When he posted that his “policies will never change,” perhaps we should take him at his word.
The greatest irony is that Trump claims to be fighting for America’s middle class, even as his policies pummel them. Nothing says “I’m looking out for the little guy” quite like a regressive tax that hits Walmart shoppers harder than Wall Street bankers.
Who knew making America great again would involve dismantling the very foundations that made it powerful in the first place? Across my columns on the Trump presidency, we’ve witnessed a presidential hat trick of self-sabotage: constitutional guardrails that contributed to American exceptionalism treated like mere suggestions, alliances discarded like yesterday’s McDonald’s wrappers, and now an economic policy that would leave Herbert Hoover speechless.
Each blow strikes directly at American interests, yet together they form Trump’s master plan – if by “master plan” we mean setting fire to the post-war order that turned the United States into a superpower and provided security and prosperity to America – and allies like Australia – along the way.
So, to those readers who insisted I just don’t appreciate Trump’s strategic brilliance: you’re right. I failed to grasp how four-dimensional chess works when the player is burning the board, melting the pieces, and declaring victory over the ashes.
Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was first published HERE
Last Thursday, on what the White House dubbed “Liberation Day,” Trump unveiled tariffs that would make even the most ardent 19th-century protectionist blush. With a 10% blanket tax on all imports, supplemented by targeted “reciprocal” tariffs, Trump erected the highest trade barrier since 1909. Vietnam was slapped with 46%, Japan with 24%, South Korea with 25%, and the European Union with 20%. Even Canada and Mexico, America’s neighbours and ostensible trade pact partners, did not escape unscathed.
For those unclear on how tariffs work, here is a simple Trump-to-English translation. When the government imposes a 25% tariff on imported steel, it’s like adding a hefty surcharge that ultimately comes out of the wallets of American businesses and consumers. The added costs ripple through supply chains, affecting everything from the car buyer in Detroit to the appliance purchaser in Dallas and the construction company in Denver. It is the economic equivalent of shooting oneself in the foot and then arguing over who should pay the hospital bill.
The markets, famously resistant to economic common sense according to populists, inconveniently tanked. The S&P 500 dropped 6% in a single day, while the Dow Jones Industrial Average plummeted over 2,200 points. The two-day tariff rout wiped out a record $6.6 trillion in market value. JPMorgan analysts promptly raised their odds of a global recession to 60%.
Trump claims his “beautiful” tariffs will generate $6 trillion in revenue over a decade. Losing $6.6 trillion to gain $6 trillion is apparently what passes for brilliant deal-making these days. The Yale Budget Lab calculated that Trump’s tariffs amount to an immediate tax increase of over $700 billion on American consumers and businesses – a contractionary shock of 2.3% of GDP even before factoring in retaliatory measures.
But perhaps the most bewildering aspect of Trump’s tariff crusade is his unyielding belief that a trade deficit means America is “losing.” To hear him tell it, the United States is being fleeced whenever it imports more than it exports. “A deficit is a loss,” he declared, as if every Toyota sold in America is a point for Japan in some grand economic competition. Never mind that Americans receive actual cars, electronics, and cheaper goods in exchange for those dollars.
This worldview – enthusiastically reinforced by hapless trade adviser Peter Navarro and Treasury Secretary Scott Bessent – treats international commerce like a sporting event with a scoreboard. “We have a $1 trillion trade deficit,” Trump laments. “Hundreds of billions of dollars a year we lose to China.” By this peculiar logic, when you buy a shirt at Target, you’ve “lost” to the retailer because money left your pocket. The fact that you now own a perfectly good shirt is apparently irrelevant.
What makes this trade war even more absurd is that it’s a solution to a problem that doesn’t exist. As the Cato Institute’s N.J. Michel explains in the Wall Street Journal, the Trump-Vance narrative that free trade has hollowed out middle America is pure fiction. The American middle class has thrived over recent decades, not declined. The share of households earning more than $100,000 has tripled over the past five decades, while the share earning less than $35,000 fell by 25%. Workers in the bottom 10% of income distribution have experienced stronger wage growth than those with higher incomes.
Free trade has brought Americans cheaper goods, greater variety, and higher living standards. The average American family saves thousands of dollars annually thanks to trade – from more affordable clothing and electronics to cheaper food and medicines. Those iPhones and affordable flat-screen TVs? Thank global supply chains. The year-round produce in supermarkets? Thank international trade. The lower-priced medications that save lives? Thank pharmaceutical supply chains that span continents.
And the claim that manufacturing jobs vanished due to unfair trade is equally bogus. US manufacturing jobs have been declining as a share of employment since 1943 – long before NAFTA, China’s WTO entry, or any of Trump’s trade bogeymen. This reflects technological progress and rising productivity, not economic failure. By 2018, an American steelworker could produce twenty times more steel per hour than in 1980.
But why let facts get in the way of a good tariff?
Secretary of State Marco Rubio reassured the public that while “markets are crashing,” economies weren’t. This is rather like saying the patient is coding on the operating table but their cholesterol numbers look great.
Clearly, this is strategic genius on a level I failed to appreciate in my previous columns. The four-dimensional chess involves sacrificing the bishop, rook, queen and most of the pawns in order to... well, I am still working out that part.
Beijing seems ready to play by Trump’s rules. Within days, China announced a matching 34% tariff on all American goods, added export controls on rare earth minerals, and blacklisted dozens of American companies. Trump remained unbowed, declaring “China played it wrong, they panicked,” as if commenting on a poker game rather than international economic policy. “Now is a great time to get rich,” he added helpfully, as millions of Americans watched their retirement accounts bleed out.
The European Union began plotting its own response, with France’s President Macron urging European companies not to invest in the United States. Canadian Prime Minister Mark Carney observed, “Our old relationship of steadily deepening integration with the United States is over.”
But perhaps the most brilliant aspect of Trump’s trade war is how effectively it undermines America’s strategic interests. After decades of careful diplomacy to build alliances against Chinese expansion, Trump has managed in a single week to throw Japan, South Korea, and Vietnam “into the delighted arms of China’s Xi Jinping,” as one analyst put it. With America now punishing its allies alongside its competitors, Xi can pose as the defender of global trade while expanding China’s economic orbit.
Taiwanese citizens, watching their American “defender” slap their nation with a 32% tariff while calling them industrial thieves, could be forgiven for reconsidering their options. Should China decide to press its claims, one wonders if Taiwan will still see America as its protector or merely as a fickle bully.
Trump’s supporters insist this is all part of a master plan — these tariffs are merely bargaining chips to secure better deals. Unfortunately, Trump has repeatedly professed his love of tariffs, calling himself “Tariff Man” and insisting they enrich America. When he posted that his “policies will never change,” perhaps we should take him at his word.
The greatest irony is that Trump claims to be fighting for America’s middle class, even as his policies pummel them. Nothing says “I’m looking out for the little guy” quite like a regressive tax that hits Walmart shoppers harder than Wall Street bankers.
Who knew making America great again would involve dismantling the very foundations that made it powerful in the first place? Across my columns on the Trump presidency, we’ve witnessed a presidential hat trick of self-sabotage: constitutional guardrails that contributed to American exceptionalism treated like mere suggestions, alliances discarded like yesterday’s McDonald’s wrappers, and now an economic policy that would leave Herbert Hoover speechless.
Each blow strikes directly at American interests, yet together they form Trump’s master plan – if by “master plan” we mean setting fire to the post-war order that turned the United States into a superpower and provided security and prosperity to America – and allies like Australia – along the way.
So, to those readers who insisted I just don’t appreciate Trump’s strategic brilliance: you’re right. I failed to grasp how four-dimensional chess works when the player is burning the board, melting the pieces, and declaring victory over the ashes.
Roger Partridge is chairman and a co-founder of The New Zealand Initiative and is a senior member of its research team. He led law firm Bell Gully as executive chairman from 2007 to 2014. This article was first published HERE
6 comments:
Trump is America's version of Jacinda. The Republicans won the last election convincingly so he is free to basically do what he likes, apart from those difficult judges. He has a cult of personality, so he has stupid people agreeing with him no matter how ridiculous he is - and many such people are in NZ. He has tame media, who uncritically promote his policies. He uses emergency powers when there isn't emergencies. He oversimplified everything which again appeals to the low intelligent. He gives a very superficial impression of strength. He has a very effective PR, saying he's looking after the little guy, and calling "liberation day" the day that Americans have been saddled with unprecedented taxes. He also uses scapegoats, personally attacking anyone who doesn't agree with him. All that sounds very familiar in NZ, but as happened in NZ, it will all unravel.
Maybe Mr Partidge could opine on the absolute given guarantee of not losing money on the sharemarket and his pension fund, to avoid my misunderstanding that the shaeremarket is akin to the casino.
It would be remiss not to ask for opinion that a Nations deficit is actually a tax because someone or something has to pay to balance the books and NOT leave uncontrollable interrest payments on the ones that follow.
Yes I support Pres Trump and believe in DOGE as a master class in assailing the US deficit, and protecting the borders controlling wrongful immigration et al. DOGE is NOT finished yet.
There are far to many NGO and parasite organiisations in NZ tht add nothing but reports, NZ. could well do with an independent DOGE as being a producer for NZ is very difficult now .
I suggest Roger Partridge should absorb the recent excellent pieces by Peter Williams, Dr Michael Schmidt and Professor Robert MacCulloch before lacing his TDS into his biased epistle.
Finally some humour amongst the lunacy
If we read between the lines here, it's obvious that the value of Roger's share portfolio has recently taken a nose dive.
I'm not quite sure where 'Eschaton', whoever he is, is coming from here, but this seems to me to be a strike below the belt.
Post a Comment